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Know the Pros and Cons of Digital and Paper Tax Returns

When you file your taxes, you’ve got two options for submitting your return with the Internal Revenue Service (IRS): electronically or by mail.

Both methods of submitting have their pros and cons.  E-filing is safe, faster, and more convenient than paper filing, but filing by email can be cheaper, although it takes the IRS longer to process refunds.

The Advantages of E-Filing

E-filing was initially introduced in 1986, and it got off to a slow start. A scant number of tax professionals–five of them, according to the IRS–took advantage of the new technology at the moment.  The new filing method eventually caught on though and, as of 2018, roughly 90% of taxpayers e-filed their returns.

Immediate Confirmation

The biggest benefit of electronic filing is that you will receive almost immediate confirmation that the IRS has received your tax return.

If the IRS finds errors on your return, you will be given a rejection notice (usually within 24-48 hours), and the notice will typically indicate what triggered the action and what you can do to fix your tax return.

Safety

E-filing is more secure than paper filing, according to the IRS, since the return, with all your sensitive data, is transmitted directly to the IRS computer system.

Faster Processing

Your refund is very likely to be processed faster because e-filing means the IRS doesn’t have to sort or transcribe your tax return in its service center.


There is a lower chance that the IRS will make a error when processing your return because IRS employees don’t need to manually enter your return line-by-line to its system.

You Do Not Have to Use a Tax Prep Program

You don’t have to use a costly tax preparation program to e-file your taxes–if you are tax savvy, have a simple situation, and are willing to understand, you can fill tax forms in directly using IRS free fillable forms.  Be aware that you need to be comfortable completing basic tax forms to use the service as no guidance is provided.  And if your adjusted gross income (AGI) is less than $72,000, you might be better off using one of the IRS’ many free-file affiliates.

The Disadvantages of E-Filing

Fees

When there are tax preparation tools that are free, many of the top tax prep firms like TurboTax, TaxSlayer, and H&R Block charge fees for tax returns that go beyond a basic filing.  Fees can exceed $100, depending on which type of features you desire.

Glitches are always possible when you’re using the net.  In 2020, TurboTax’s website experienced at least seven outages between April 15 and April 17.  Also, your internet service provider may face outages that could hamper your filing effort.

Does Not Allow for Certain Filing Situations

Though e-filing supports most tax scenarios, there are certain scenarios it does not support.  For instance, you can not file a return for somebody who passed away, you can not attach pictures or PDFs to your return, nor will you file before the IRS opens e-filing for the year.

Benefits of Paper Filing

Filing a paper return can be very helpful in some specific scenarios that e-filing can’t accommodate.

You’ve Got a Rare Filing Situation

For example, if you need to prepare a tax return for somebody who passed away, you must file a paper return.  Also, paper filing allows you to print and submit pictures or PDFs to supplement your own tax return.

You Need to Build Your Tax Expertise

Many online tax prep tools automate the filing process by asking you questions and using your replies to fill out forms without telling you which forms it is filing on your behalf.

You may fill out every form line-by-line and see first-hand all of the calculations and considerations your refund requires.

Disadvantages of Paper Filing

There are lots of drawbacks to paper filing that make the procedure riskier and more taxing than e-filing.

Increases Odds of Errors

Data transcribers in the IRS must manually enter taxpayer information for each paper return they get.  As a result of this, it might result in errors that you might need to fix through an amended return.

For filers who attempt paper filing after years of electronic filing, gathering all the forms necessary for things like student loan interest, mortgage interest, capital gains, and business deductions can be intimidating, and it might lead to missing forms or errors.

You Need to Remember to Sign the Return

Veteran paper filers realize that you have to manually sign the paper return you submit, or the IRS will not accept it.  Newbie paper filers often forget this fact, leading to even longer delays than what you’d normally expect with a paper return.

You can do a few things to streamline your yield entry when you file :

  1. Make sure that your name and Social Security number are on each page, both front and back. 
  2. This is where the IRS will send any notices, so it’s important that you don’t make a mistake.

  3. Mail your return to the perfect IRS service center, as the address can change depending on which state you are in, and whether you are including payment with your return.  The IRS provides a state-by-state list online so you can find the correct address.

  4. Get an automatic extension if you are mailing your return close to the official filing deadline of April 15, 2021.  Bear in mind that you should make a payment with your extension if you believe you’ll owe anything.  Otherwise, you might be subject to penalties and interest.

The IRS provides a list of acceptable filing options on its website, which include the following options:

  1.             Hire a tax professional to prepare your return. 
  2. There are particular requirements for e-filing or paper filing should you use one of these programs.

In the unlikely event your identity is stolen and the thief files a tax return with your information, your e-filed return will be rejected by the IRS as a copy.  You have to file a paper tax return in this case and mail it in with Form 14039, the”Identity Theft Affidavit,” notifying the IRS of the issue.

Key Takeaways

    1. E-filing is quickly and provides several free options
    2. Web or website outages can cause frustrating delays for e-filers. 
    3. Paper filing requires more time than e-filing and can be overpowering. 
    4. Alternatives to filing taxes on your own include hiring a tax professional or participating in filing aid programs.